Re: Russian oil

["Devine, James" <jdevine@xxxxxxx>]

Right: anyone owning a limited resource will save some for later rather
than pumping it all now. Specifically, I am told that Saudi Arabia (a
very capitalist place, when it comes to oil issues) caps a lot of its
wells. Its leaders want to save its oil wealth for later, so that its
political clout won't disappear overnight. 

also, when the price of oil is low, the incentive to pump out all the
oil is very low. 

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine 

-----Original Message-----
From: Ted Winslow [mailto:egwinslow@xxxxxxxxxx]
Sent: Tuesday, April 27, 2004 1:43 PM
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: Re: [PEN-L] Russian oil

Louis Proyect quoted Mark Jones: 

In the West, if an oil corp. finds oil, they want 
to pump it out as soon as possible. 


If it's knowable and known that oil will be soon be depleted, rational
profit maximizing management of the resource will incorporate this into
the current price via what Keynes called "user cost," won't it? Part of
the cost of producing and selling oil now is the foregone opportunity of
selling it later. Mark's analysis seems to ignore this. 


Ted